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AGRICULTURE, TRADE, AND POVERTY IN EGYPT 95


In this chapter we review the income and consumption patterns of Egyp- tian households based on the 1997–98 Egypt Integrated Household Survey and estimate the effects of changes in the prices of five agricultural commodities on incomes and poverty rates among Egyptian households. Such price changes might arise from changes in world market prices or from changes in border or subsidy policies within Egypt.


Overall, our results show that price changes can have a significant effect on poverty among the producers of specific crops, but these price changes will not have a large impact on overall rates of poverty. We simulated the effect of a 40 percent increase in the price of each commodity, which repre- sents the upper limit of the effect of global trade liberalization, as follows:9 • For wheat, a 40 percent increase in the price will lower national poverty by 1 percentage point.


• For rice and horticultural produce, a 40 percent increase in the prices will raise national poverty by 1 percentage point.


• For cotton and sugar, a 40 percent increase in the prices will have a neg- ligible effect (less than 0.5 percent) on national poverty.


• A 40 percent increase in the prices of all five product categories will result in higher poverty in urban and rural areas, though the increase will be just 1–2 percentage points.


One implication of this analysis is that agricultural trade policy is a relatively ineffective policy instrument for assisting poor rural households. Another interesting result is that, although wheat is the most politically sensi- tive agricultural commodity in Egypt, the effect of wheat protection on pov- erty is small even among wheat farmers themselves. This is because wheat farmers are not particularly poor (they are somewhat better off than the average rural household), because their incomes are fairly diversified (wheat accounts for only 8.5 percent of their incomes), and because many other households in urban and rural areas are net buyers. For example, almost 80 percent of rural households are net buyers of wheat. Although policy deci- sions take into account a wide range of factors not considered here, this analysis should at least weaken the poverty alleviation argument for a wheat protection policy.


Finally, the analysis suggests that some of the poorest households in Egypt are those that are involved in farming but do not own land. These households include agricultural laborers and tenants who cultivate land owned by others.


9 At the same time, this simulation represents an underestimate of the impact of the global price crisis of 2007–08.


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